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Federal Reserve officials were unsure of decision to cut rates in September

Author: Content Editor
The Federal Reserve officials were divided on how to handle interest rates in September, resulting in a half-percentage-point cut. Some members wanted a smaller cut while others wanted a more aggressive approach. Governor Michelle Bowman was the only one who voted against the half-point cut, preferring a 25 basis point cut instead. The decision was tough as there were differing economic outlooks among the committee. Cutting rates too much too soon concerned some members, especially as there were signs of cooling inflation. Under normal conditions, the Fed prefers quarter-point cuts and only resorts to half-point cuts during major economic crises. Market predictions suggest that the fed funds rate will end 2025 between 3.25% and 3.5%. There is a 1-in-5 chance that the Fed won't cut rates again at its next meeting in November. The bond market has reacted with yields on Treasury notes increasing. The strong labor market supported the argument for a 50 basis point cut as officials didn't want to stall progress on inflation. Federal Reserve Chair Jerome Powell stated that the cut was a "recalibration" of the Fed's stance and not a reflection of a worse economic outlook or indication of more aggressive moves. The Fed is likely to continue with 50 basis point cuts, but smaller ones are not ruled out in the future. The data is creating uncertainty in predicting future moves.

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